By: Minister of State with responsibility for Financial Services, Credit Unions and Insurance; Sean Fleming
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Check Against Delivery
Introduction
I would like to thank Insurance Ireland for inviting me to open their ninth annual Fraud Conference. The theme of this year’s conference – “The Culture of Fraud in Ireland”- touches on a perception issue relating to insurance fraud, insofar that it is often viewed as a victimless crime in which no one gets hurt. In the overall scheme of things, the making of a false claim or exaggeration of damages can be viewed as insignificant. However, the cumulative impact of these actions affects all policyholders.
In addition, fraud affects every type of insurance, whether it is non-life insurance, life and protection cover, or health insurance. It can be committed by the policyholder or a third party claimant, across all socio-economic groups. It can range from opportunistic claims or ghost brokering, through to claims for phantom passengers in road accidents and fictitious or exaggerated injuries. Of course, it can also extend to highly organised crime rings. In the same vein, the fight against insurance fraud requires a united approach from multiple stakeholders, many of whom I am glad to see represented at today’s event.
It is of course important to recognise that the overwhelming majority of genuine insurance claims far outnumber the fraudulent cases each year. Our focus on tackling fraud should never hinder the ability of an insured person suffering a genuine loss due to the negligence of another to seek appropriate compensation. This is an important right, and as Minister of State with responsibility for Insurance, I believe it is imperative that we keep it to the forefront of our minds when having these discussions.
Having said that, it is equally clear that we must fight insurance fraud in order to protect genuine policyholders and other groups who ultimately end up footing the bill for fraudsters. Whether it is a premium hike, a waste of Garda resources, or even a strain on the health service by diverting ambulances to attend staged accidents, the effects of insurance fraud are far-reaching and potentially damaging for all members of society. Perhaps more than anything, the COVID-19 crisis has brought home to us how interdependent society is, and the profound impact that the actions of one individual can have on others. I believe insurance fraud needs to be viewed from the same perspective, with a clear understanding of the need for each of us to play our part in order to successfully challenge it.
We have been long aware of the importance of tackling fraud, as is evidenced by the fact that we are now nearly a decade on from the inaugural Insurance Ireland Fraud Conference. Of course, the insurance industry plays a vital role in fighting fraud and is the key first line of defence. It is vital that all insurers put the necessary resources into detecting insurance fraud, and where they suspect fraud, it is essential that insurers actively challenge it and work constructively with the Gardaí, especially around the provision of evidence. At the outset this morning, I would urge firms to redouble their efforts in this area and to strengthen their fraud teams where possible, in order to reinforce the efforts being undertaken at Government level.
Turning now to those efforts, tackling insurance fraud is an important pillar of the Government’s reform agenda. This agenda is being prioritised by the Cabinet Committee Sub-Group on Insurance Reform, which is chaired by the Tánaiste. The Sub-Group also includes the Ministers for Finance and Justice, as well as relevant Ministers of State, including myself. This wide-ranging reform agenda encompasses a number of areas including the need to promote competition, reform the Personal Injuries Assessment Board, implement the Personal Injuries Guidelines, reform the duty of care, and increase transparency. In some ways, these reforms are equally important in tackling fraud, as in many cases, they address issues which may have in the past led to perverse incentives for people to commit insurance fraud, either through exaggerating an injury, or seeking to game the personal injuries system through a perception that they couldn’t lose. I am pleased to say that progress on the implementation of our Action Plan for Insurance Reform is proceeding well. The Implementation Report published last July showed that 34 of the 66 actions were complete. The delivery of all of these key reforms when taken together should have a positive impact on insurance fraud.
This said, I need to be clear that the overall aim of our work is to improve the cost and availability of this vital financial service to consumers and small businesses, particularly those in sectors involving high footfall, where we have seen the supply of insurance tighten in recent years. Insurance Ireland members should be the first to benefit from these recent reforms and I would urge them and the wider insurance industry to live up to the commitments they have made.
Progress Update on Action Plan
Turning now to providing updates on specific actions related to tackling fraud, those present here today will be aware that the Government’s Action Plan contains a number of important measures on which good progress has been made. I would like to speak on a few of these in the context of today’s theme.
New Offence of Perjury
Delegates will be aware that there are a variety of offences on the Irish statute book which can be utilised to fight against fraud. These have included Sections 14 and 25 of the Civil Liability and Courts Act 2004, and various offences set out in the Criminal Justice (Theft and Fraud Offences) Act 2001. These are already important tools in tackling fraud. The recent enactment of the Criminal Justice (Perjury and Related Offences) Act 2021 is an important addition to this list. I know that many of Insurance Ireland’s members have welcomed this legislation, which places perjury on a statutory footing for the first time. This provides a clear definition of perjury and should make it easier to prosecute this offence. A greater benefit still, in my view, is that it should serve as a strong deterrent to making false or exaggerated claims in the first place. This is especially true given the clear penalties it provides for certain offences. We all agree that it is best to nip a problem in the bud. In the future, I believe that this legislation will make clear the seriousness of lying under oath in any circumstances, including in an insurance case, and will act as a powerful disincentive from doing so.
Insurance Fraud Coordination Office
Another key development has been the establishment of a new Insurance Fraud Coordination Office within An Garda Síochána. I am sure that Detective Superintendent Michael Cryan will say more on this later, however I would like to say that the setting up this Office has been made possible thanks to the increased resources given to the Garda National Economic Crime Bureau over the course of this year. The specialist skills and support of the Bureau are vital assets in tackling insurance fraud.
The Insurance Fraud Coordination Office is expected to bring more consistency to the reporting, recording, and investigation of fraud cases. Importantly, I understand that the Office will ensure that all fraud cases received by the Gardaí are reviewed and recorded on the PULSE system. By improving the reporting of cases, this should in turn give rise to a greater number of referrals to the Director of Public Prosecutions. In terms of publishing data on insurance fraud, I understand that further engagement is now needed with relevant agencies on statistics, in order to identify possible additional requirements to allow for regular publication.
I met with the Garda Commissioner and other members of the force earlier this month to discuss a number of issues, including the new Fraud Office. I understand that within a month of it being set up, there are already a number of cases under investigation. This is welcome news, and I wish every success to those involved in this new development. Of the many actions being pursued in this arena, I believe that the creation of a dedicated Insurance Fraud Office most clearly highlights the seriousness with which Government takes the issue of fraud, and our clear intent to target it.
Collaboration between industry and Gardaí
As I mentioned at the outset, tackling insurance fraud is not just the job of any one party. In order to be successful, it requires collaboration with and between the insurance industry and An Garda Síochána. I know that great strides have already been made in recent years to enhance cooperation and coordination between the Gardaí and industry, such as regular meetings between Insurance Ireland and the Garda National Economic Crime Bureau. I welcome these efforts and urge all those involved to remain focussed on them.
For our part, the Programme for Government commits to further increasing coordination and cooperation between An Garda Síochána and industry. Under the Action Plan, I understand that the Gardaí are updating guidelines for reporting insurance fraud with both Insurance Ireland and the Alliance for Insurance Reform, which are expected to be in place by the end of the year. As with the creation of the Fraud Office, these should provide another tool to improve the reporting of fraud. This in turn should render the Gardaí better-equipped to target instances of fraud, whether they are isolated acts by individuals, or broader operations conducted by organised crime gangs.
Uninsured Driving
A separate but related matter intrinsic to any discussion about the culture of insurance fraud, is uninsured driving. As with all other examples of fraud, the costs of uninsured driving are ultimately borne by innocent parties, notably insured motorists. According to the Motor Insurers’ Bureau of Ireland, or MIBI, the cost of the claims it pays each year adds around €30 to every premium sold. While MIBI is responsible for claims resulting from both uninsured and unidentified drivers, accidents involving uninsured vehicles make up the vast majority, accounting for over 70% of the claims it receives annually. From an industry perspective, MIBI expenses constitute 4% of gross underwriting costs per annum. These numbers paint a clear picture, and suggest that reducing levels of uninsured driving could act as another lever to lower costs for both policyholders and insurers.
As many here will know, legislative amendments in the forthcoming Road Traffic and Roads Bill 2021 will further support the operation of the Motor Third Party Liability database so that it can be used by frontline Gardaí to identify and apprehend uninsured vehicles on our roads. From my recent meeting with the Garda Commissioner, it is clear that the Gardaí rely on having accurate, reliable data to hand to do their job. I agree fully with his assessment and would urge all insurers to engage fully on ensuring that such information is available. I also welcome the contribution made by Insurance Ireland and its members to date, both in terms of funding for the project and the provision of details of individual policies to the database.
My officials are closely monitoring the movement of this Bill, which I am pleased to say has been listed as a priority piece of legislation for the autumn. As such, it is my hope that it can be progressed promptly during the current parliamentary session. In preparation for its enactment, I understand that Insurance Ireland is already engaging with the Gardaí and the Department of Transport. It is my understanding that consideration is being given to the possibility of incorporating relevant information with systems such as the new Garda ACTIVE Mobility App. This would greatly strengthen our ability to clamp down on uninsured driving.
Personal Injuries Guidelines
I know that Counsel Conor Kearney will give a keynote address later on the new Personal Injuries Guidelines adopted by the Judicial Council. Before concluding, I would like to briefly speak on what I believe is possibly the single biggest reform in the insurance sector since the establishment of the Personal Injuries Assessment Board. The new Guidelines offer us a golden opportunity to push down insurance costs, and to foster a competitive market that is attractive to both existing insurers and potential overseas entrants. As you are aware, on average the Guidelines have nearly halved the value of award levels for general damages, bringing the levels for many common injuries within the jurisdiction of the District Court, which should in turn have a dampening effect on legal fee costs. In addition, they should bring much more certainty to the personal injuries claims process, and encourage more settlements at the level of PIAB.
The overall impact of these reforms should be to lower the cost of claims for insurers, in turn reducing customers’ premiums and allowing insurers to widen the range of cover they provide in this country. I believe the guidelines will achieve a notable reduction in premiums, and this should deter individual attempts at fraud, including uninsured driving.
In meetings with insurers over recent months, a consistent message I have heard is that use of the new guidelines, in conjunction with PIAB reform, offers the greatest opportunity to improve the affordability of insurance. However, this success is reliant on consistent respect for the guidelines from all stakeholders, and I urge everyone here today to play their part in this regard. In particular, it is vital that insurers do not undermine the guidelines by settling claims at higher amounts for the sake of speed or ease. I know that the guidelines have been welcomed by industry, indeed industry had been calling for such reform for a long time. I and my Government colleagues expect that all insurers will now prove their support for the guidelines by consistently following their lead, and passing on any savings accrued from their use to customers.
Concluding Remarks
I would like to conclude by thanking Insurance Ireland again for the opportunity to address this event, and to assure you that the Government remains determined to fully implement the Action Plan for Insurance Reform. In doing so, our focus remains not just on tackling fraud, but on progressing a wider reform agenda with a view to improving the insurance environment for all, especially consumers, businesses, and the many voluntary groups that make up the core fabric of our communities. Buy-in from all stakeholders, including industry, is essential if the Action Plan is to have the desired effect, and I look forward to constructive engagement with Insurance Ireland and its members on these wide-ranging reforms in the months ahead.
ENDS